Housing Starts in Saskatoon to Moderate in 2014 and 2015

SASKATOON, SASKATCHEWAN--(Marketwired - May 22, 2014) - According to Canada Mortgage and Housing Corporation's (CMHC) Spring 2014 Saskatoon Housing Market Outlook released today, total housing starts in the Saskatoon Census Metropolitan Area (CMA) are forecast to moderate to 2,880 units in 2014 before declining further to 2,835 units in 2015.

"With an elevated volume of complete and unabsorbed homes in inventory, local home builders will be reluctant to quicken the pace of housing starts this year. In addition, a moderating pace of employment growth and net migration will move housing starts lower this year and next," said Goodson Mwale, CMHC's Senior Market Analyst for Saskatchewan.

Single-detached builders in Saskatoon are expected to start nearly five per cent fewer units in 2014 as they contend with heightened inventory and competition from a well-supplied resale market. After 1,580 single-detached starts in 2014, a further reduction to 1,560 units is projected for 2015. "Given that spec homes comprise more than 90 per cent of single-detached units in inventory, this will prompt a slower pace of starts this year and next," noted Mwale. Despite the moderation, single-detached starts will remain elevated by historical standards, supported by continued employment growth and an expanding population.

Multi-family starts, which consist of semi-detached units, rows and apartments, are projected to reach 1,300 units in 2014, down slightly from 1,322 in 2013. With absorptions lagging completions so far this year, the inventory of complete and unabsorbed multi-family units has continued to rise, which will prompt builders to slow the pace of introducing new projects this year. Barring a meaningful reduction in inventory, a further moderation to 1,275 multi-family starts is expected for 2015.

After a 2.7 per cent expansion in 2013, sales of existing homes in Saskatoon are on pace to rise 3.7 per cent this year to a record 5,750 transactions and then to 5,825 in 2015. Gains in sales will be supported by continued employment growth, low mortgage rates, and elevated net migration.

The average MLS® price in Saskatoon is forecast to increase 2.8 per cent to $341,300 in 2014 and rise 2.1 per cent to $348,600 in 2015. These gains will be considerably lower than the increases during the previous two years. Elevated supply relative to demand will moderate resale price growth this year and next. Thus far in 2014, compositional factors have contributed to the upward movement of the average resale price. In 2015, rising carrying costs, slightly higher mortgage rates, and weaker equity gains are expected to slow the shift towards higher priced homes, contributing to more modest gains in the average resale price next year.

As Canada's national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.